Guest Author - Guido Deboeck

Over the years I have collected shelves full of investment books. What is remarkable is that few have any lasting value. The ones that have retained value are those written by or about famous investors: Jesse Livermore, Peter Lynch, Warren Buffet, Larry Williams, Thomas Dorsey, William O’Neil, to name just a few of my favorites. As I am running out of shelf space I stopped buying investment books some time ago.

That is until last week when I notice a page ad in the New York Times on a book called Rule #1 by Phil Town. The subtitle was: The simple strategy for successful investing in only 15 minutes a week. How could anyone devote only 15 minutes a week to investing and be successful? Intrigued by the potential time-savings and the simplicity of the strategy, I ordered a copy from amazon, using some reward certificates, hence the book did not cost me anything....

The book arrived last Monday; I finished reading it last night. Phil Town’s Rule #1 is an easy to read, commonsense, fundamental book about investing that is refreshing in many ways but as Jim Cramer points out is “a homework-driven read”. In other words, if after reading Phil’s book you expect that all your investment decisions are going to require just 15 minutes of home-work a week you will be dead wrong (unless you buy all of Phil's investment tools, but more on those later).

The first part of Phil’s book is easy: he talks about myths of investing including the mutual fund scam (which is why you should fire your mutual fund manager); then introduces the four M’s of investing, meaning the business you invest in should have meaning, moat, good management and a margin of safety. Each of these M’s is then explained in Chapters three to eight.

Next comes Calculate the Sticker Price, Chapter 9, in which Phil outlines a method to estimate what will be the fair value of a business in 10 years. The method and even the math are straightforward but the value of predictions for 10 years is questionable. At one point Phil shoots himself and his approach in the foot when he writes “no way I can predict Google will be in business in 10 or 20 years; therefore {Google} is disqualified as a solid Rule #1 investment.” If he cannot predict which businesses will be around in 10 years from now, why calculate the sticker price?

I rolled out of my chair when I read about the computation of the Harley sticker price (p.161). Here was a company that Phil likes, because he likes to ride motorcycles, it meets all the M’s, it could be bought at $29 a share, and “if all goes according to plan” he would sell it in ten years for $345. Two pages later Phil writes that in the period 2000-2005 Harley went down; his return would have been 14.9 percent if he had bought it at $29 and held his shares till 2005 (when in June the stock was $50 per share), still a very nice rate of return, he writes but adds “so you can suppose correctly that I did not buy and hold”. Meaning, even the Harley case casts doubt about the validity of ten year sticker price calculations.

That’s unfortunately not all. On the web you can read comments from people who have attended Phil’s “Get Motivated” workshops. Some wrote that the $495 workshops are half educational and half hype. The main purpose of the workshops is to sell educational programs and investment tools that cost from $4000 to $16,000 dollars. Chapters 9 to 13 of Phil's book demonstrate why you need those...how clever!

Bottom line: Phil Town’s book, which at Amazon you can get for as low as $12.7, is worth reading at least till chapter 9; the Q&A and Chapter 14 are also worth browsing. But better hurry because the sticker price on Phil's book could be $2.50 in five years or $0.50 in ten, just like many other investment books on my shelf. The rest of your intro to investing you better learn from the gurus, none of which will claim that it takes only 15 minutes a week to become a pro in investing.